Should Maritimers pay more in taxes than Albertans? – Postscript

For anybody looking to take a strip off me for suggesting some kind of provincial personal tax harmonization – put away the pitchfork – I am not calling for this. What I am saying is that in my opinion the fiscal gap is going to widen in Canada and provincial governments in places like New Brunswick and PEI, for example, are going to be under increasing pressure to raise taxes to pay for boomer health care. Of course, you will say the equalization program was set up to ‘equalize’ but in fact it is a set dollar amount each year and it is unlikely to be the vehicle to flow a pile of new money to pay for the public services needed by our aging population. Harper has already ruled out any special funding for provinces with older populations like in the Maritimes and will be capping health transfers in line with GDP growth later on in this decade.

So, it is not completely crazy to think that provincial governments will have to raise taxes and further erode tax competitiveness between the provinces.

And, as I say in the piece, this didn’t matter as much when it was grumbling local populations but NB, NS, PEI, etc. will have to attract tens of thousands of workers from outside their borders in the coming years and the level of taxation matters.

So I will reiterate my main point. I am not calling for provincial tax harmonization across Canada. My point is that in a fiscal union like Canada, all provinces have to understand that the economic trajectory in other provinces will impact their own fiscal situation and when Ontario joins the have-nots – it could start to get really interesting.

7 Responses to Should Maritimers pay more in taxes than Albertans? – Postscript

David,
Thank you for the clarification – my sword has been sheathed! While I know that this will not happen, at least not in my lifetime, I feel that the whole concept of equalization payments is wrong. People should not be subsidized to live anywhere,including the Maritimes. I am a native of Moncton, but left NB because of better opportunities in Ontario(lower taxes was a bonus). I have many friends and family who live in the Maritimes for different reasons, including a slower pace of life, family, etc. However, I don’t believe that taxpayers in Alberta, BC and Newfoundland should have to support them in their freely made choice.
I totally agree with your point about the importance of strong regional economies, which is why I’m baffled at the local opposition to fracking in NB. It seems like just when a huge opportunity knocks, some people there complain about the noise. What they seem to be saying is we don’t want responsible development of our natural resources, we just want those equalization checks to keep rolling in, thanks in good measure to Newfoundlanders’,Alberterns’ and British Columbians’ willingness to develop theirs.

What would Alberta do without the influx of Maritimers going there for work? As for the fracking, I don’t think the locals would be as opposed if the companies involved had a good track record of “responsible” development.

You’ve said before, and I agree, that we really need new immigration in order to really get a handle on the demographic shift in the province.

But what are the concrete measures that would support it? If it were me I would be looking as a province to directly sponsor some thousands of new immigrants every year. People are lining up to get into Canada – we could help them with that.

I know, everybody will say that there has to be jobs for them. I don’t agree – we get them here and help them set up and they’ll create their own jobs. And their very presence will trigger an infusion of federal and other money.

New Brunswick will never progress until it embraces and actively encourages the demographic expansion that has taken place in places like Toronto and Vancouver. We need to put a proper program into place.

As a proud Nova Scotian living in Calgary (and working in the Patch) I am very disappointed at the level of hostility the industry has received in New Brunswick and Nova Scotia to a lesser extent (due to less on-shore development activity). I have spent a great deal of energy (pardon the pun) convincing some rather right-wing people here that our Confederation works because we have a transfer union (unlike the EMU) and that although transfer payments may be painful to Alberta, it is the only way this country can from work a macroeconomic and political level given the huge disparity in natural resources between different provinces. Especially when you consider the impact of the ‘petro/mineral-loonie’ on manufacturers, or any exporters for that matter not exporting commodities set at a global price. My common rebuttal to the idea of ending equalization is “OK, so now poorer larger provinces have less ‘skin in the game’ for resource development out west and they are only receiving the negative consequences of it. Maybe they will choose to place much more strict environmental regulations on the oil sands. Can you blame them?” Certainly a race to the bottom that approach is.

Though I will continue to support equalization programs (unlike regional EI policies, but that’s a different topic) I do think this recent example of anti-development sentiment sets a very bad precedent, and gives ammunition to those that really do want to start dividing this country into provincial ‘haves’ and ‘have nots’ more rapidly. If poorer provinces don’t want to take the ‘risks’ of energy development (which is likely a bit rich to even say given how established hydraulic fracturing is, but I’ll give them the benefit of the doubt) then perhaps the federal government really does need to think about penalizing provinces, somehow. How about a carrot and stick approach to Canadian federalism for once? Cut your deficits, encourage development, you get a carrot. Continue running large deficits and discouraging investment, you get a stick.

“It seems like just when a huge opportunity knocks, some people complain about the noise”. Nice turn of phrase, Sam Stevens.
I have defended equalization (a misnomer of course, it never came close to equalization, even in the better days) in answer to those who claim there is a disincentive to develop on the part of poorer provinces which, they said, would only lose in equalization what they gain in revenue (there’s much more to gain from development than an increase in tax revenues). However, the No shale gas nowhere attitude does make it more difficult to defend the sharing that comes via ‘equalization’.

– I think the bulk of the opposition to shale gas could be deflected if the government and/or industry made a legally binding promise to fully compensate any personal or property harm caused by the extraction process. That this has not been forthcoming is rather surprising to me. A firm guarantee to save harmless people impacted would be what we would *expect* as a matter of course, but people here have had negative experiences with the energy industry.

– As a Canadian I have as much right to oil wealth should I happen to live in Calgary as I would should I live in Moncton. Indeed – I lived for 17 years in Alberta and put a lot of sweat into the development of that province; one could argue that I have *more* of a right to it that people who just moved out there recently (similarly, I could argue that I shouldn’t have to pay high taxes to service NB’s debt when I didn’t have any hand in creating it).

– Wwe should view equalization as the price provinces pay for autonomy. In a normal nation, resource royalties would be collected nationally, and the federal government would assert governance over a wider array of services. So people in NB and Alberta would get the same (federally funded) health care or education, for example. There is nothing inherently wrong with equalization – there never has been – and people arguing for the elimination of equalization should also demonstrate why the constitution should contuinue to allocate resource royalties provincially

– People who argue that equalization creates a disincentive for NB to develop economically should also be required to show why oil royalties do not create a similar disincentive in Alberta

I actually pay about $5000/year in property taxes here in NB and in Alberta it was only $2200 and the house price was almost double that of my current home, plus I’m on well water and septic so I don’t even get as many services. I even had to pay double taxes for 2-3 years before I moved from Alberta, a provincial component that brought it up to almost $10K. You’re welcome NB 🙂